Finance

Housing Finance Bank directed to justify Shs30b capital injection from govt

 

Managing Director Housing Finance Bank Mathias Katamba (left) and State Minister for Finance David Bahati. Photo by Vincent Kasozi.

KAMPALA–MPs on the finance committee of parliament have asked Housing Finance Bank officials to offer thorough justification for a request of a Shs30 billion capitalization from government.

Housing Finance bank bosses appeared before the committee this morning led by the finance minister in charge of planning David Bahati to make a case for the capitalization request.

According to Bahati the money is required to meet new capital requirements by the Bank of Uganda which asked commercial banks to raise their share capital, Bahati says the Bank’s capital base therefore needs to be increased by Shs 61 billion to Shs 122 billion.

Bahati told MPs that the government will provide Shs30 billion for the required amount while NSSF will come up with the remaining Shs 61 billion to enable the Bank meet the new capital requirements.

The bank is owned jointly by the government of Uganda which owns 49.18% with NSSF owning 50% while the National Housing and Construction Company owns 0.82%.

In his justification Bahati noted that the new share capital from the shareholders will be leveraged to grow the loans and advances from the Shs383 billion as at December 2016 to the projected Shs800 billion over the next five years.

“We will be able to enable the bank to continue meeting capital requirements and consolidate and improve its position in the lending sector where we are currently ranked number 8 in the market,” Bahati said.

Bahati further informed the MPs that in consultation with the ministry of lands, Housing Finance Bank agreed to come up with a mortgage product suitable for civil servants which will be based on salary levels and for a period of 20 years.

Bahati explained that this mortgage innovation was due to the fact that the Shs 30 billion the government was going to capitalize the bank with is from the proceeds earned from the sale of government pool houses that used to be occupied by civil servants.

“So when we sold the pool houses the bank has been holding these resources, so we want to use the 30bn which we got from the pool houses to capitalize but for us to maintain the spirit of civil servants we are going to come up with a product that will help salary earners to also buy a home with a reasonable interest rate,” he stated.

However, MPs were skeptical about this planned mortgage offer to civil servants and asked the bank officials to provide a concrete proof of what this product will entail in order for MPs to gauge whether it will be of benefit to low income earners in the public service.

“We need concrete evidence that this is the product that they will be able to afford and take advantage of.” Elly Asiku the Koboko North MP stressed.

The Kumi county MP Illukor Charles quizzed the minister on why nothing had been done for civil servant’s housing 20 years down the road after the pool houses had been sold.

The Managing Director of the bank Mathias Katamba was called upon to brief MPs on the profitability of the bank. He noted that the bank posted profits of Shs 18 billion in 2016 up from Shs 14 billion in 2015, he added that total assets are now valued at Shs 680 billion by end of 2016 up from Shs 618 billion the previous year.

Katamba informed MPs that 40% of profits are reinvested in the bank. However The Chief Finance officer of the Bank Medard Mwesigwa noted that these funds were inadequate to sustain the current capitalization requirements of the bank.

The chairperson of the committee Rubanda East MP Henry Musasizi told the minister and his team that his committee was not able to justify the request without additional information.

He requested for additional documents which include audited accounts of the bank for the last five years and a business plan and growth prospects following the capitalization. Musasizi also requested for the details of the impact of the capitalization.

He directed that the information be made available by Friday.

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